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Outsourcing Provider Selection: 6 Questions to Ask First

In a recent Alsbridge engagement the client leadership team sat down to make their final selection between two providers. Both providers demonstrated sufficient financial stability, functional and industry knowledge, marketplace credibility and the capability to deliver the client’s requirements.

We advised the CIO to answer these six questions before they signed on the dotted line with their chosen provider – key questions that revolved around areas critical to the foundation for their joint success moving forward.

Question 1: Transition – Does the provider have a rock solid transition plan with adequate mitigation strategies that will help to effectively and efficiently move the current operation to their new delivery team?

Hint: Get the advice of those who know and have experience with service transition before forming your own opinion about how long the process should take within your company culture and operational environment. The provider plan must take into account a six to eight week knowledge transfer process wrapped inside multiple work streams of delivery staffing, retained organization design, process development, development of detailed metrics, refinement of the overall service level agreement and certification from the provider that they are operationally ready to take on your company’s business operations. If the plan is too aggressive or lacks powerful clarity, the odds are that the provider is unaware of something important about your environment. Anything overlooked during transition planning will rear its ugly head during knowledge transfer, extending the stabilization period and affecting the efficiency and management of risk as you begin steady state.

Question 2: Legal / Negotiations – How did the provider conduct themselves leading up to and during contract negotiations?

Hint: The motivation behind any sourcing engagement is profit – on the part of both parties; however, meeting the client’s objectives through an equitable arrangement is the only way a provider can be successful for the long term. Test your provider’s motivation from the first encounter and determine whether you can see a long-term relationship forming with their team. The provider will be doing the same, and their comfort level will set up an evolving behavior pattern affecting whether they can negotiate a deliverable and financially viable agreement. Their initial objectives and resulting behavior may very well be a prologue to what you can expect in your future relationship, so it is in your best interest to nurture a win/win environment and thus unearth the best your provider has to offer.

Question 3: References – Has the provider demonstrated the capability/capacity to deliver to similarly situated clients?

Hint: Obtain from your advisor or develop internally a common script for all of the reference calls. In order to use the results of these conversations as one of the scoring criteria in provider selection, it is helpful to ask all references a common set of questions. We recommend graphing the call results for easy reporting to senior management, an important step in justifying use of the results in your evaluation. Be sure to probe deeply when you conduct reference calls as it is the one chance you have to find out how the provider has truly performed for other clients of like size, scope and industry.

Question 4: Relationship Team – Has the provider assigned the right people to our account?

Hint: The provider’s Client Manager and Delivery Manager – the people on the ground overseeing day-to-day activities – must be able to easily navigate the provider’s internal organization in order to resolve issues in a timely manner. The client organization should have seen a glimpse of this capability in interactions with the provider’s internal team and executive management while conducting due diligence, workshops, site visits and negotiations. If the client’s proposed delivery team has been a part of the selling effort, they will have a smoother start up because they were part of the solution design.

Question 5: Pricing – Is the provider’s price too competitive compared to their competition?

Hint: If there is great disparity between the final two providers make sure to have assurances from the lowest priced provider’s top executives that they will indeed deliver for that price. Otherwise, they may come back later and claim they ‘missed something’ and ask you to help them to get “profitable” regardless of being contractually bound by the agreement. Sadly, some still use this bait and switch approach and then seek to get around it with change orders.

Question 6: Cultural Fit – Which provider does our team feel is the best fit culturally and can work with you effectively for the long term?

Hint: In your interactions with the provider, they should have demonstrated the ability to work with your team amicably and honestly, and talked to the fact that your corporate values and cultures are aligned. In addition, you should feel there is a sincere openness, that you can trust the provider in a difficult situation and that they say what they mean. If they told you what they would do and have done what they said, consider that to be a positive evaluation point. If you have any doubts, the time to probe is before contract signing while the leverage is still clearly with your team.

Summary

Few negotiations sessions end without generating more questions in the minds of both parties, if you have the luxury of time, try to get those questions answered before signing. This is a partial list of questions, focused on areas we have seen make a material difference in the early success of contractual relationships and certainly here for your consideration before making your final decision to move forward.

Source: Outsourcing Leadership